1. Z H O N E T E C H N O L O G I E S MAKING TRIPLE PLAY MAINSTREAM BUSINESS Luis Heredia CALA SE Manager Zhone Technologies, Inc.

2. 2 Zhone Technologies  Zhone Technologies is a next- generation communications equipment provider dedicated to providing multi-service solutions for carriers and MSOs Founded 1999 Focused on triple play (IPTV), VoIP, FTTx and metro-access transport solutions Over 300 customers worldwide Fifteen sales offices in eight countries Offering complete lifecycle customer service Zhone Oakland Headquarters

3. 3 Over 100 Commercial IPTV Deployments in North America 250+ IPTV Communities About 300,000 homes served… …Over 1,500,000 homes passed Commercially Available Technology Has Enabled Growth Yet more than 35 operators have less than 500 subscribers (scalability) Substantial IPTV Traction Exists in North America Today… Mostly IOC and Rural Telco’s Under 40K lines

4. 4 Service Models Vary Worldwide Cable Competition VOD IPTV MMS Services CLEC Competition Hong Kong: IPTV ‘giant’ 300K IPTV subscribers since 2003 1.5 M VOD subscribers since 2000 1M worldwide IPTV subscribers (2004) 500K in North America

5. 5 Services rapidly evolving…So is Capacity Today -  Standard Definition MPEG2 Broadcast  Limited HDTV programming  VOD  Personal PVR (Time shift TV) Around the Corner -  Standard Definition MPEG4 Broadcast  Broad HDTV programming – MPEG4  TV on Demand  Network Time shifted broadcast  Interactive TV programming  MMS device to device video “Push Based Content Programming” “Pull Based Content Programming” IP Enabled

6. 6  15 million households will be accessing IPTV services by the end of 2007  Global revenues from the sector will exceed $7.5 billion in 2007 Forecasted Households Accessing IPTV Sources: Datamonitor (Global); Infonetics (U.S.)

7. 7 IPTV Market Set to Explode Millions Source: Strategic Analytics Global IPTV Forecast (2003), Cahner’s In-Stat MDR Worldwide Market: IPTV Set Top Devices Low Cost IP STB’s (Asia) High End IP STB’s (RBOC) Residential Gateways (multiple TV’s) Telco Demand

8. 8 About Set Top Boxes  Only 20% of U.S. cable customers have STB’s today  Most consumers not familiar  Costly for initial boxes and replacements $350 $300 $200 $150 $100 2001 2002 2003 2004 2005 2006 Predicted price for standard Definition basic IP STB (MPEG2)

9. 9 The Technology is HERE!!!

10. 10 5 Ingredients for Triple Play Success Copper video Data Voice video IP Fiber:  Loop Fiber  FTTc to FTTp ADSL2+:  Today technology  Copper re-use Pure Packet”  Head end  Internet  Encoder to access  Cost + integration IGMP:  Imbedded in access  Distributed In-Home  Lower CPE costs  Less wiring  Easy installation

11. 11 Pure Packet Network - Middleware Middleware Set Top Box Ported to API on STB Operating System Ported to API on STB Operating System Integrated to Middleware Conditional Access System VOD - PVR Integrated to Middleware Considerations  Thick or thin client  Memory requirements  Processing needs  Box features Vs. middleware applications  3 rd party vendors/applications supported

12. 12 What you should know about IGMP  IGMP was not originally intended for video/channel changing For data Internet multicast UDP static state: No means of authentication  IGMP standard requires a number of compromises  Not all IGMP is implemented the same: therefore performance varies Full implementation IGMPv2 with DIM-PM (Routers) Access IGMPv2 management with IGMP proxy Access ‘pass-through’ with IGMP Snooping  IGMP involves no security for content Does not identify or care what device sends a join  IGMP joins and leaves frequently get out of balance (dropped/overflows) No automatic method in IGMP standard to “clean up” multicast IGMP is to video what Dial Tone is to POTS

13. 13 MPEG2 and ADSL2+ Opportunities ADSL2+ 3.8 Mb/s 2.0 Mb/s 128 Kb/s 4.0 Mb/s 3.5 Mb/s SD Video Data VoIP 14 Mb/s to 9 K/ft. Current state of Technology 13.4 Mb/s bandwidth used.6 Mb/s IP/ATM line overhead ADSL2+ Pair Bonded 12.9 Mb/s 2.0 Mb/s 128 Kb/s 4.0 Mb/s 3.8Mb/s SD Video Data VoIP HD Video MPEG2 26 Mb/s to 9 K/ft. 2005 state of Technology 24.5 Mb/s bandwidth used 1.55 Mb/s overhead bandwidth

14. 14 MPEG4 and ADSL2+ Opportunities ADSL2+ MPEG4 1.6 Mb/s 2.0 Mb/s 128 Kb/s 1.5 Mb/s 1.4 Mb/s SD Video Data VoIP 7.0 Mb/s to 13 K/ft. Extending ADSL2+ reach 6.6 Mb/s bandwidth used.4 Mb/s overhead bandwidth ADSL2+ 7.5 Mb/s 2.0 Mb/s 128 Kb/s 1.5 Mb/s SD Video Data VoIP HD Video 14 Mb/s to 9 K/ft. 2005 state of Technology 12.9 Mb/s bandwidth used 1.1 Mb/s overhead bandwidth 1.8Mb/s

15. 15 STB Solutions Do you want this?

16. 16 Zhone Residential Gateway – IPTV, Triple Play  All in one Solution  Complete CO to CPE solution  Uses existing home wiring  Eliminates Set-Top Boxes Supports 100Mbps of internet access Offers up to 4 phone lines  Supports FTTH and DSL  Outdoor or Indoor Deployment ZRG 5xx Outdoor Unit ZRG Indoor unit Enable Triple Play Over Copper or Fiber ZRG Outdoor unit

17. 17 Zhone Residential Gateways Lowers the cost of deployment – No truck roll Lowers the Cost of Operation – One point of entry to the Customer Premises

18. 18 Thank You